How Commodities (Brent, Crude and Nat.Gas) prices are derived

PrimeXBT Commodities trading has many advantages for investors who are only interested in price speculation. We offer hassle-free trading access to these contracts with no need to worry about the expiration and ‘rollover’ to the next month. A Commodity's (BRENT, CRUDE and NAT.GAS) price is derived as a combination of the first and second nearby month future contract. The price for each of these instruments is derived from a weighted average between the 1st and 2nd month Future Contracts (explained in further detail below) and follows the business day convention from New York.

This pricing method diminishes the level of volatility when the first nearby futures contract is near expiration, since there is often lower liquidity. Furthermore, rolling your position from the 1st to 2nd nearby month happens in smaller daily increments, instead of paying the full difference when close to expiration.

Pricing of PrimeXBT Commodities (BRENT, CRUDE, NAT.GAS)

The price of PrimeXBT Commodities is determined in accordance with the following formula:

1DNumDaysRelevantPriceofFirstNearbyMonth+DNumDaysRelevantPriceofSecondNearbyMonth1 - \\ \dfrac{D}{NumDays} * Relevant\, Price\, of\, First\, Nearby\, Month \\ + \\ \dfrac{D}{NumDays}*Relevant\, Price\, of\, Second\, Nearby\, Month

D

The number of Commodity Business Days from (and including) Previous Expiration Date to (but excluding) the Roll Date.

NumDays

The number of Commodity Business Days from (and including) the Previous Expiration Date to (but excluding) the Next Expiration Date

Next Expiration Date

The date of expiration of the First Nearby Month

Previous Expiration Date

The date of expiration of the Previous Nearby Month that expired Immediately prior to the Roll Date.

Roll Date

The second Commodity Business Day after the current Business Day

Relevant Price

CRUDE: Underlying asset exchange is CME and the product is NYMEX WTI Light Sweet Crude Oil Futures; NAT.GAS: Underlying asset exchange is CME and the product is NYMEX Henry Hub Natural Gas Futures; BRENT: Underlying asset exchange is ICE (ICE Futures Europe) and the product is Brent Crude Futures

Example of Pricing

D = 11 NumDays = 20 Relevant price of First Nearby Month = 20 USD Relevant price of Second Nearby Month = 25 USD

CommodityPrice=(11120)20+112025=0.4520+0.5525=22.75Commodity\, Price = \left( 1 – \tfrac{11}{20}\right) * 20 + \tfrac{11}{20} * 25 \atop = 0.45 * 20 + 0.55 * 25 = 22.75

Financing Charges of Commodities

Commodities are a margined product; therefore, the traded value is financed through an overnight financing charge. If a position is opened and closed within the same trading day, it will not be subject to overnight financing charges.

More info on fees: https://primexbt.com/fees